Firm q currently has sales of 5 million assume that the, Ask an Expert

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Firm Q currently has sales of $5 million (assume that the cost of goods sold is $4 million, or a 20% gross profit margin) and an inventory turnover of 5.0 (i.e., the firm tends to to sell out its inventory five times throughout the year). Because of a new promotion, sales are expected to increase by 10% while maintaining the same average inventory. How does this affect the average age of the inventory (AAI), the operating cycle (OC), and the cash conversion cycle? Support your answers with calculations. If the sales promotion offers customers credit (i.e., increases the accounts receivable), how would this affect your previous answer?

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Financial Management, Finance

Category:- Financial Management
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